CHAPTER 1
1. The form of organization for a business is not an
important issue, as this decision has verylittle effect on the income and
wealth of the firm's owners.
a. True
b. False
2. The major advantage of a regular partnership or a corporation
as a form of businessorganization is the fact that both offer their owners
limited liability, whereas proprietorships donot.
a. True
b. False
3. The facts that a proprietorship, as a business, pays no
corporate income tax, and that it iseasily and inexpensively formed, are two
key advantages to that form of business.
a. True
b. False
4. Which of the following is a primary market transaction?
a. You sell 200 shares of IBM stock on the NYSE through your
broker.
b. IBM issues 2,000,000 shares of new stock and sells them
to the public through an
investment banker.
c. You buy 200 shares of IBM stock from your brother. The
trade is not made through a broker--you just give him cash and he gives you the
stock.
d. One financial institution buys 200,000 shares of IBM stock
from another institution. An investment banker arranges the transaction.
e. You invest $10,000 in a mutual fund, which then uses the
money to buy $10,000 of IBM shares on the NYSE.
5. One drawback of switching from a partnership to the
corporate form of organization is the following:
a. It subjects the firm to additional regulations.
b. It cannot affect the amount of the firm's operating income
that goes to taxes.
c. It makes it more difficult for the firm to raise
additional capital.
d. It makes the firm’s investors subject to greater
potential personal liabilities.
e. It makes it more difficult for the firm’s investors to
transfer their ownership interests.
6. The primary operating goal of a publicly-owned firm
interested in serving its stockholdersshould be to
a. Maximize the stock price per share over the long run,
which is the stock’s intrinsic value.
b. Maximize the firm's expected EPS.
c. Minimize the chances of losses.
d. Maximize the firm's expected total income.
e. Maximize the stock price on a specific target date.
In finance, intrinsic value refers to the value of a
security which is intrinsic to or contained in the security itself. It is also
frequently called fundamental value. It is ordinarily calculated by summing the
future income generated by the asset, and discounting it to the present value.
"Intrinsic value" is defined as the present value of all expected
future net cash flows to the company.
7. The potential conflict of interest between a firm's
owners and its managers is referred to as a(n):
a. organizational problem.
b. structure problem.
c. agency problem.
d. control issue.
e. management conflict.
8. Which of the following are advantages of the corporate
form of organization?
I. ability to raise large sums of capital
II. ease of ownership transfer
III. corporate taxation
IV. unlimited firm life
a. I and II only
b. III and IV only
c. II, III, and IV only
d. I, II, and IV only
e. I, II, III, and IV
9. The primary goal of financial management is to maximize
the:
a. current net income.
b. net working capital.
c. the number of shares outstanding.
d. market value of the existing stock.
e. revenue growth.
10. If an individual investor buys or sells a currently
outstanding stock through a broker, this is aprimary market transaction.
a. True
b. False
-------------------------------
-------------------------------
1. Which one of the following is a capital structure
decision?
a. Should a new machine be purchased this year?
b. Should the credit terms offered to customers be revised?
c. Should debt or equity financing be used to purchase a
building?
d. Should the level of inventory be increased?
2. Which one of the following functions is generally under
the control of the corporate treasurer?
a. cost accounting
b. tax management
c. financial planning
d. financial accounting
3. Which one of the following best describes the liability a
general partner has for the partnership debts?
a. none
b. liability limited to amount invested in the firm
c. liability limited based on percentage ownership
d. unlimited
4. Which one of the following provides you with the greatest
control over a firm’s daily operations?
a. limited partner
b. major stockholder in a corporation
c. minor stockholder in a joint stock company
d. sole proprietor
5. A limited partner:
a. has no personal responsibility for the debts incurred by
the partnership.
b. is guaranteed a return of his or her entire investment in
the partnership if the partnership terminates.
c. can only control the daily operations for an individual
segment of the partnership.
d. has minimal control, if any, over the daily operations of
the partnership.
6. The primary goal of corporate financial management is to
maximize the:
a. total revenue of the firm.
b. number of shares of common stock outstanding.
c. current value per share of the existing stock.
d. current net income of the firm.
7. The Sarbanes-Oxley Act in 2002 is designed to protect the
public against:
a. a firm’s net operating losses if those losses extend
beyond a 2-year period.
b. declines in the market value of a firm’s outstanding
shares of stock.
c. financial malpractice and accounting fraud.
d. a firm’s issuing additional shares of stock if the issue
will reduce the market value of the current
outstanding shares.
8. Who has the ultimate control over a corporation?
a. shareholders
b. chief executive officer
c. chairman of
the board
d. board of directors
9. Which one of the following is a primary market
transaction?
a. Theo, the president of ABC, sells some of his shares in
ABC on the NYSE
b. ABC offers newly issued shares to the general public
c. Tom instructs his broker to sell all of his shares in
ABC, Inc.
d. Mary gifts shares of ABC stock to her son
10. Public offerings of both debt and equity securities are
regulated by the:
a. Securities and Exchange Commission.
b. U.S. Banking and Financial Services Agency.
c. U.S. Treasury Department.
d. Federal Reserve.
Review Quiz for Chapter 1
1. Which one of the following is a capital
structure decision?
a. Should a new machine be purchased this year?
b. Should the credit terms offered to customers be revised?
c. Should debt or equity financing be used to purchase a
building?
d. Should the level of inventory be increased?
2. Which one of the following functions is
generally under the control of the corporate treasurer?
a. cost accounting
b. tax management
c. financial planning
d. financial accounting
3. Which one of the following best describes the
liability a general partner has for the partnership debts?
a. none
b. liability limited to amount invested in the firm
c. liability limited based on percentage ownership
d. unlimited
4. Which one of the following provides you with the
greatest control over a firm’s daily operations?
a. limited partner
b. major stockholder in a corporation
c. minor stockholder in a joint stock company
d. sole proprietor
5. A limited partner:
a. has no personal responsibility for the debts incurred by
the partnership.
b. is guaranteed a return of his or her entire investment in
the partnership if the partnership terminates.
c. can only control the daily operations for an individual
segment of the partnership.
d. has minimal control, if any, over the daily operations of
the partnership.
6. The primary goal of corporate financial
management is to maximize the:
a. total revenue of the firm.
b. number of shares of common stock outstanding.
c. current value per share of the existing stock.
d. current net income of the firm.
7. The Sarbanes-Oxley Act in 2002 is designed to
protect the public against:
a. a firm’s net operating losses if those losses extend
beyond a 2-year period.
b. declines in the market value of a firm’s outstanding
shares of stock.
c. financial malpractice and accounting fraud.
d. a firm’s issuing additional shares of stock if the issue
will reduce the market value of the current
outstanding shares.
8. Who has the ultimate control over a corporation?
a. shareholders b. chief executive officer c. chairman of
the board d. board of directors
9. Which one of the following is a primary market
transaction?
a. Theo, the president of ABC, sells some of his shares in
ABC on the NYSE
b. ABC offers newly issued shares to the general public
c. Tom instructs his broker to sell all of his shares in
ABC, Inc.
d. Mary gifts shares of ABC stock to her son
FINC 3311 Business Finance Dr. Xavier Garza Gómez
10. Public offerings of both debt and equity
securities are regulated by the:
a. Securities and Exchange Commission.
b. U.S. Banking and Financial Services Agency.
c. U.S. Treasury Department.
d. Federal Reserve.
Answers
1. c
2. c
3. d
4. d
5. d
6. c
7. c
8. a
9. b
10. a
Không có nhận xét nào:
Đăng nhận xét